Global stock indexes hit record highs last week as investors believe the US Fed will cut interest rates and trade tensions between the US and China appear to be easing.
On Wall Street, the Dow Jones index jumped 2.2 percent last week, to 47,207 points, while the S&P 500 rose 1.9 percent, to 6,791 points, and the Nasdaq 2.3 percent, to 23,204 points.
All three indices hit record highs on Friday, when it was reported that consumer prices in the US rose by 0.3 percent on a monthly basis and 3 percent on a yearly basis in September. Although this is slightly higher inflation than a month ago, it is lower than analysts expected. As a result, investors believe the US central bank will cut interest rates by a further 0.25 percent next week, as it did in September. In addition, investors hope that the Fed will cut interest rates in December to support the faltering labor market and boost consumption and economic growth.
The market was also supported by the message from the White House that next week US President Donald Trump will meet Chinese President Xi Jinping during his tour of Asia. Trade tensions between the world’s two largest economies have been growing for a long time, and Trump has said in recent days that he expects a successful meeting with Xi, but also that there may not be a meeting at all.
The White House’s confirmation that the meeting will be held in South Korea late next week boosted investors’ hopes for an easing of trade tensions.
– The announcement of the White House indicates the belief that trade negotiations between the US and China will lead to positive results in the coming days. I don’t believe that either side would bring their leaders to a meeting that would fail – explains Kyle Rodda, an analyst at Capital.com.
Quarterly business reports of companies were also in the focus of investors. Most of them achieved better results than expected. So far, more than 140 companies from the S&P 500 index have published reports, with 87 percent reporting higher earnings than expected.
That is why analysts in a Reuters survey now estimate that the earnings of companies from the S&P 500 index in the third quarter increased by 10.4 percent compared to the same period last year, while at the beginning of the financial reporting season they expected an increase of 8.8 percent.
And on the European stock exchanges, share prices rose strongly last week. The London FTSE index jumped 3.1 percent to 9,645 points, while the Frankfurt DAX rose 1.7 percent to 24,239 points and the Paris CAC 0.6 percent to 8,225 points. Thanks to this, the STOXX 600 index of leading European shares reached a new record level – 575.7 points.
